The National Australia Bank has hauled back on its interest forecast ahead of next Tuesday’s Reserve Bank board meeting.
NAB cut cut its rate rise forecast to one late this year from the previous forecast of two in 2018, and suggested that it would not be surprised if the increase was delayed into 2019.
The bank’s economics team led by head economist, Alan Oster said the change was due to the weak wage growth and an expected slowing in job creation.
This is despite the monthly business conditions and confidence services from the NAB showing some of their strongest reading for a decade or more. “Weak wages growth and slow progress reducing unemployment means it is now less likely that the RBA will raise rates twice in 2018, which was our previous forecast,’ the NAB economic team wrote yesterday.
“We now see the RBA raising rates only once in late 2018 – with November 2018 as the most likely start date for a gradual RBA rate hiking cycle.
"By late 2018 growth should be near 3% and the unemployment rate approaching 5%. That, together with increasing tightness in employers’ ability to find suitable labour, may finally see private sector wages start to moderately edge up.
“Inflation by that time should also be approaching the bottom of the 2-3% target range.
“That said, much will still depend on the data flow – it is not impossible that the RBA stays on hold for all of 2018 and raises rates in early 2019,’ the NAB team said.
